Bob Toll on US Housing

Pity anybody with the misfortune of sitting on a panel with Toll Brothers CEO Bob Toll. Speaking to a packed audience, Toll was on form, especially with his whistle-stop tour of the entire US, talking about markets which are doing really well (New York City, Connecticut, Washington DC) and those which are in the pits (Boston, suburban New Jersey, Phoenix, Las Vegas, Michigan – and, of course, Florida.)

In other words, you can't just throw a dart and make money in the property markets these days, as you could at pretty much any point over the past 10 years. But Toll is still constructive over the long term: "Right now we've got a demand problem, but generally, we've got a supply problem," he says. "You're going to come to see housing represent 45-50% of household income, as it does in Europe, rather than the 35% we see here. But I don't know when."

Other Toll observations which rang true:

• The rise in urban residential real-estate is not a speculative bubble, but rather demographic: "a desire for urban living". 35-year-olds are choosing to raise a family in an urban setting now, whereas 15 years ago they would always move to the suburbs.
• Even as Americans get older, they have no desire for smaller houses: retired couples want more space, not less, after the kids leave home.
• There's still no desire for green houses. "We tried to experiment with selling energy-efficient homes, and completely flopped compared to selling more moldings," says Toll. Even something as simple as a day-night thermostat doesn't sell when compared to, say, a gold ceiling rose for the chandelier. Energy efficiency might be the low-hanging fruit when it comes to reducing US carbon emissions, but there's no indication at all that Americans want to pick it.